Where is my bailout?

wallstreet bail outThe average investor has seen their portfolio decrease in value by about 20%, the average property owner is not far off that either. The economy is slowing down and everything seems to be more expensive, so today’s question is: Where’s my bailout?

I am not Bear Stearns, or IndyMac, I’m also not Northern Rock, Fortis or Bradford & Bingley, I am not any number of financial institutions that will soon be set to receive money from the Fed, and even by third world terms I am not ‘too big to fail’. The fact of the matter is that I’m all alone on this one, and I don’t have enough faith in our leaders that I would be comfortable ‘leaving it up to them’. Instead, I want a port in this storm.

Now we can sit back and face the inflation, the inflation that will one day ‘inflate away debt‘ but in the mean time the $700 billion (thats over 2/3’s of a TRILLION! – see a trillion in numbers to get the idea- $1,000,000,000,000) rescue package will heap the debt on to everybody else, dollar devaluation is going to be a side effect, which apparently is better than actually facing your problems, and savers will not be rewarded in a time of inflation so it will hack away at retirement accounts and savings too. On the bright side it might mean that with a weak dollar people will take manufacturing jobs in the US and that will help their economy come back, I believe that a move away from industry is part of what must be reversed to keep a healthy economy.

silence on the marketsSome people feel that rather than fighting the ‘bailout’ culture of new capitalism that we should embrace it and see if the average Joe can get in on having their worthless assets taken over, of course, the only way for this to work is not if they are valued at their ‘actual’ value, but rather their ‘assumed’ value, in fact one site is already doing this (here). But back to little old me, or little old you. What about us? Good question.

Personally I feel there has never been a better argument for Gold (if you want to talk about this you can call us of course!), if you put a piece of gold in the ground 100 years ago and dug it up today it would still be worth something, while a paper money retrieved from the same time might have some value as an artifact but it is utterly useless. Nothing hedges against inflation like gold, adjusted for inflation gold still has not reached the prices that it did in the early 80’s (the inflation adjusted figure is $2,500).

Gold is apparently in short supply at the moment too. In the past we commented how there is a finite amount of gold in the world and how there is not much more coming on stream any time soon, that means that it will still hold value, in fact, property (after wars, Napoleonic wars, during plagues, after WWII in many areas etc.) and paper money (hyperinflation – Germany 1930’s, Zimbabwe – 2005 to present day) have achieved zero value sums before, gold never has, in all of recorded history gold has had a value. There are different ways to invest in gold, you can do it by holding certs, actual gold, or via gold focused funds & ETF‘s.

stop government bailoutsWhat else might be a port in the storm? Oil might be, although my opinion is that as economies shrink that demand will do the same, having said that, dollar devaluation might buffer a fall off in those prices. Oil would not be as preferred as gold but it is a decent second choice.

Food companies will also perform well, as will livestock commodities. Why? It’s a thing called ‘Global Warming’ and we’ve all heard of it, the frequency of hurricanes and record rain is not just a freak accident, it is something that will likely be a trend for some time to come. That will make feeding the worlds near 6 billion people harder to do and therefore food will carry a premium for all of those who can’t grow their own. In the developed world that premium can be realised by investments, in the third world it is a literaly example.

So when the Government make their emergency budget on the 14th of October, don’t be surprised if there is no ‘bail out’ for you, I won’t take it personally if they ommit mine. What you can do though, is spend some time with one of our financial advisers and examine ways that you can outperform and beat the recession.

Comments

  1. I would be wary of investing in gold ETFs.
    On the back of the AIG near-collapse, the LSE stopped trading all the AIG insured commodity ETFs because the market makers didn’t have enough confidence in AIG to quote prices.

    http://www.forbes.com/afxnewslimited/feeds/afx/2008/09/18/afx5440576.html

    This shows the problems inherent with gold-backed securities. One of the main reasons owning bullion is the ultimate safe-haven asset is that there is no counterparty risk. If the problems with the world markets continue in the trajectory they have been following, you can expect serious splash damage to other markets and ETFs could be one of them.

  2. this comment comes from a person well qualified to make it, I’ll be taking this advice personally!

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